Following the Dow’s worst start to a year since 2008, Wall Street was attempting to rebound as stocks opened slightly higher Tuesday as losses in global markets eased after Chinese officials took steps to stabilize the stock market in mainland China and reduce investor jitters.
Wall Street enters the second day of trading of 2016 still on the defensive and gains were small as investors are still reeling from a global stock sell-off Monday and evaluating the most recent steps taken by Chinese authorities to calm markets.
The Dow Jones industrial average, which tumbled 1.6% Monday, was up about 15 points, or 0.1% and the Standard & Poor’s 500 gained 0.2%. The tech-heavy Nasdaq composite rose 0.1%.
Overnight, shares in mainland China stabilized with the help once again from government intervention in markets a day after a 7% plunge prompted an early halt to trading in what was the worst start to the year ever for China stocks.
The CSI 300 index in China finished with a small gain after dipping as much as 2% and the Shanghai composite index fell 0.3%.
The early-year volatility is gaining a lot of attention as a weak start to 2016 could set a negative tone for the full year.
Many market pundits say investors should prepare themselves for a year of volatility as China and its slowing economy stays in the spotlight.
“I think this is mostly about China,” Mark Luschini, chief investment strategist at Janney Montgomery Scott, told USA Today. “The lack of evidence that officials there have arrested the growth deceleration is worrisome. This means, for me, that while Monday's action may be more than just China, add tensions between Saudi Arabia and Iran and yesterday’s weak manufacturing data in the U.S., the market's skittishness will linger until the China story is resolved.”
Global stocks had a not so happy first day of trading in the new year when investors reacted negatively to a manufacturing report out of China that showed contraction for the tenth straight month. The latest weak data point from China reignited fears of a sharper slowdown in global growth.
Just as they did this past summer when its markets went haywire, Chinese authorities went on the offensive Tuesday and took steps to prop markets up. The People’s Bank of China injected roughly $ 20 billion of liquidity into the financial system, the largest injection since September, according to a report to clients from Barclays’ Guillermo Felices.
In addition, China’s top security regulator also moved to allay fears “by saying it is studying ways to control the pace of share sales when a (six-month) ban on selling by major shareholders expires this week (Jan. 8),” Felices wrote. New measures will likely be rolled out, the official Xinhua agency reported.
Bloomberg also reported that state controlled funds in China were in the market buying shares.
Despite the steps by Chinese officials, the slide in Asian stock markets continued, albeit with smaller price declines. The Nikkei 225 in Japan closed 0.4% lower and shares in Hong Kong dipped 0.7%.
In Europe, shares recovered from their early-morning lows and were trading higher. The broad Stoxx Europe 600 was up 0.7%, while the DAX in Germany was up 0.3% and the CAC 40 in Paris gained 0.4%.
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